There
are a lot of good things in our country, but many individuals and
families who need these goods lack the right to have them, the
permission to get them. Is there anything lacking but money? What is
lacking, apart from the purchasing power to make the products go from
stores to homes?

Money
begins somewhere

But
then where does money begin, the money that we lack in order to buy the
goods that are not lacking?

The
first idea that we keep alive in our minds, without really realizing it,
is that there is one fixed quantity of money, and that it cannot be
changed; as if it was the sun, or the rain, or the weather. This idea is
utterly wrong; if there is money, it is because it was made somewhere.
If there is not more, it is because those who made it did not make more.

Another
prevalent belief about the origin of money is that the Government makes
it. This is also incorrect. The Government today does not create money,
and complains continuously about not having any. If the Government were
the source of money, it would not have sat around idly for ten years in
front of the lack of money. (And
there would not be a $500-billion
national debt.) The Government takes and borrows, but it does
not create money.

Our
standard of living, in a country where money is lacking, is not
regulated by the volume of goods produced, but by the amount of money at
our disposal to buy these goods. So those who control the volume of
money, control our standard of living. “Those who control money and
credit have become the masters of our lives... No one dare breathe
against their will.” (Pius XI,
Encyclical Letter Quadragesimo Anno).

Two
kinds of money

Money
is whatever serves to pay, to buy; whatever is accepted in exchange for
goods or services.

There
are at present two kinds of money in Canada: one we call pocket money,
made of metal or paper; and the other we shall call book money, made of
figures in a ledger. Pocket money is the least important; book money is
the most important.

Book
money is the bank account. Business operates through bank accounts.
Whether pocket money circulates or not depends on the state of business.
But business does not depend upon pocket money; it is kept going by the
bank accounts of businessmen.

With
a bank account, one makes payments or purchases without using metal nor
paper money. One buys with figures.

Let
us suppose I have a bank account of $40,000. I buy a car worth $10,000.
I make my payment by a cheque. The car dealer endorses the cheque, and
deposits it at his bank.

The
banker then makes changes in two accounts: first, that of the car
dealer, which he increases by $10,000; then mine, which he decreases by
$10,000. The car dealer had $500,000 — he now has $510,000 written in
his bank account. I had $40,000 in mine — my bank account now shows
$30,000.

Paper
money did not move in the country because of this deal. I simply gave
some figures to the car dealer. I paid with figures. More than
nine-tenths of all business is done this way. It is book money, the
money made of figures, which is modern money; it is the most abundant
money; its volume is ten times that of paper or metal money. It is a
superior type of money, since it gives wings to the other. It is the
safest kind of money, the one that no one can steal.

Savings
and borrowings

Book
money, like the other type of money, has a beginning. Since book money
is a bank account, it comes into existence when a bank account is opened
without money decreasing anywhere, neither in another bank account nor
in anyone's pocket.

The
amount in a bank account can be increased in two ways: by saving and by
borrowing. There are other ways, but they can be classified under
borrowing.

The
savings account is a transformation of money. I bring along some pocket
money to the banker; he increases my account by this amount. I no longer
have that pocket money; I have book money at my disposal. I can get back
pocket money by decreasing the amount of book money in my account. It is
a simple transformation of money.

But
since we are trying to find out how money comes into existence, the
savings account, being a simple transformation of money, is of no
interest to us here.

The
borrowing (or loan) account is the account lent by the banker to a
borrower. Let us suppose I am a businessman. I want to set up a new
factory. All I need is money. I go to a bank and borrow $100,000 under
security. The banker makes me sign a promise to pay back the amount with
interest. Then he lends me the $100,000.

Is
he going to hand me the $100,000 in paper money? I do not want it. First,
it is too risky. Furthermore, I am a businessman who buys things at
different and widely separated places, through the medium of cheques.
What I want is a bank account of $100,000 which will make it easier for
me to carry on business.

The
banker will therefore lend me an account of $100,000. He will credit my
account with $100,000, just as if I had brought that amount to the bank.
But I did not bring it; I came to get it.

Is
it a savings account, set up by me? No, it is a borrowing account made
by the banker himself, for me.

Money
creators

This
account of $100,000 was made, not by me, but by the banker. How did he
make it? Did the amount of money in the bank decrease when the banker
lent me $100,000? Well, let us ask the banker:

—
Mr. Banker, have you any less money in your vault after having lent me
$100,000?

—
I haven't gone into my vault.

—
Have other people's accounts been reduced?

—
They remain exactly as they were.

—
Then what was decreased in the bank?

—
Nothing was decreased.

—
Yet my account has been increased. From where did the money you lent me
come?

—
It didn't come from anywhere.

—
Where was it when I came into the bank?

—
It didn't exist.

—
And now that it is in my account, it exists. So we can say that it was
created.

—
Certainly.

—
Who created it, and how?

—
I did, with my pen and a drop of ink when I inscribed $100,000 to your
credit, at your request.

—
Then you create money?

—
The banks create book money, the money of figures. That's the modern
money that puts into circulation the other type of money by keeping
business on the move.

The
banker manufactures money, ledger money, when he lends accounts to
borrowers, individuals, or governments. When I leave the bank, there
will exist in this country a new source of cheques, one that did not
exist before. The total amount of all accounts in the country was
increased by $100,000. With this new money, I will pay the workers, buy
materials and machinery — in short, build my new factory. Who,
then, creates money? — The bankers!

Money
destroyers

The
bankers, and the bankers alone, make this kind of money: script or bank
money, the money that keeps business moving. But they do not give away
the money they create. They lend it. They lend it for a certain period
of time, after which it must be returned to them. The bankers must be
repaid.

The
bankers claim interest on this money that they have created. In my case,
the banker will probably demand $10,000 from me in interest, at once. He
will withhold it from the loan, and I will leave the bank with $90,000
in my account, having signed a promise to repay $100,000 in one year's
time.

In
building my factory, I will pay my men, buy things, and thus spread my
bank account of $90,000 throughout the country.

But
within a year, I must, through the profits I make selling my goods for
more than they cost me, build my account up to not less than $100,000.

At
the end of the year, I will pay back the loan by making out a cheque for
$100,000 on my account. The banker will then debit my account by
$100,000, therefore taking from me this $100,000 I have drawn from the
country by selling my goods. He will not put this money into the account
of anyone. No one will be able to draw cheques on this $100,000. It is
dead money.

Borrowing
gives birth to money. Repayment brings about its extinction. The bankers
bring money into existence when they make a loan. The bankers send money
to the grave when they are repaid. The bankers are therefore also
destroyers of money.

And
the system so operates that the repayment must be greater than the
original loan; the death figures must exceed the birth figures; the
destruction must exceed the creation.

This
seems impossible, and collectively, it is impossible. If I succeed,
someone else must go bankrupt, because, all together, we are not able to
repay more money than has been made. The bankers create nothing but the
capital sum. No one creates what is necessary to make up the interest,
because no one else creates money. And yet, the bankers demand both
capital and interest. Such a system cannot hold out except for a
continuous and ever-increasing flow of loans. Hence the system of debts,
and the strengthening of the dominating power of the banks.

The
national debt

The
Government does not create money. When the Government can no longer tax
nor borrow from individuals, due to the scarcity of money, it borrows
from the banks. The operation takes place exactly like mine. As a
guarantee, it pledges the whole country. The promise to pay back is the
debenture. The loan of the money is an account made by a pen and some
ink.

And
the country's population finds itself collectively indebted for a
production that, collectively, it made itself! It is the case for war
production. It is the case also for peacetime production: roads,
bridges, waterworks, schools, churches, etc.

The
monetary defect

The
situation comes down to this inconceivable thing: all the money in
circulation comes only from the banks. Even metal and paper money comes
into circulation only if it has been released by the banks.

Now
the banks put money into circulation only by lending it out at interest.
This means that all the money in circulation comes from the banks, and
must someday be returned to the banks, increased with the interest.

The
banks remain the owners of the money. We are only the borrowers. If some
manage to hang on to their money for a long period of time, or even
permanently, others are necessarily incapable of fulfilling their
financial commitments.

A
multiplicity of bankruptcies, both for individuals and companies,
mortgage upon mortgage, and an ever-increasing public debt, are the
natural fruits of such a system.

Decline
and degradation

This
way of making the country's money, by forcing governments and
individuals into debt, establishes a real dictatorship over governments
and individuals alike.

The
sovereign Government has become a signatory of debts to a small group of
profiteers. A minister, who represents millions of men, women and
children, signs unpayable debts. The bankers, who represent a clique
interested only in profit and power, manufacture the country's money.

This
is one striking aspect of the degeneration of power of which Pope Pius
XI spoke: governments have surrendered their noble functions, and have
become the servants of private interests.

As
for individuals, the scarcity of money develops a mentality of wolves.
In front of plenty, only those who have money — the too scarce symbol
of goods — have the right to draw on that plenty. Hence the
competition, the tyranny of the “boss”, domestic strife, etc. A
small number preys on all the others. The great mass of the people
groans, many in the most degrading poverty.

The
social control of money

It
is Saint Louis, King of France, who said: “The first duty of a king is
to coin money when it is necessary for the sound economic life of his
subjects.”

Book
money is a good modern invention that should be retained. But instead of
it proceeding from a private pen, in the form of a debt, those figures,
which serve as money, should come from the pen of a national organism,
in the form of money destined to serve the people.

One
must stop suffering from privations when there is everything needed in
the country to bring comfort into every home. The amount of money should
be measured according to the demand of the consumers for possible and
useful goods.

It
is therefore the producers and consumers as a whole, the whole of
society, which, in producing goods in front of needs, should determine
the amount of new money that an organism, acting in the name of society,
should put into circulation from time to time, in accordance with the
country's developments.

Thus
the people would recover their right to live full lives, in accordance
with the country's resources and the great possibilities of modern
production.

Who
owns the new money?

Money
should therefore be put into circulation according to the rate of
production and as the needs of distribution dictate.

But
to whom does this new money belong when it comes into circulation in the
country? — This money belongs to the citizens themselves. It does not
belong to the Government, which is not the owner of the country, but
only the protector of the common good; nor does it belong to the
accountants of the national monetary organ- ism: like judges, they carry
out a social function and are paid, according to law, by society for
their services.

To
which citizens? — To all. This money is not a salary. It is new money
injected into the public, so that the people, as consumers, may obtain
goods already made or easily realizable, which are awaiting only
sufficient purchasing power for them to be produced.

There
is no other way, in all fairness, of putting this new money into
circulation than by distributing it equally among all citizens without
exception. Such a sharing also makes it possible to derive the maximum
benefit from the money, since it reaches into every corner of the land.

Whenever
it might become necessary to increase the amount of money in a country,
each man, woman and child, regardless of age, would thus get his or her
share of the new stage of progress that makes the new money necessary.

This
is not payment for a job done, but a dividend to each one for his share
in a common capital. If there is private property, there is also
community property that all possess in the same way.

Result:
order restored

What,
according to us, would be the effect of this financial reform? First of
all, in a general way, order would be restored in the money sector,
consequently in economics, with echoes in the political and social
spheres.

Goods
would be made to serve needs. The accumulation of money would stop being
the commanding aim of industry. (And one would therefore not need to
create artificial needs to sell useless products, thus reducing waste
and pollution.)

The
way to obtain the implementation of an honest money system is to form a
public opinion sufficiently enlightened and motivated to make a
successful demand for it. So there is no question of an election
campaign, but rather of an education campaign.

This
propagation of study among the masses requires the devoted efforts of
numerous apostles who are not afraid of self-abnegation and sacrifice.
And it is still in order. The present disorder is the result of all
kinds of selfishness. All this must be expiated and corrected. As Pope
John Paul II put it in his encyclical letter Sollicitudo Rei Socialis: “These attitudes and `structures of sin'
(love of money and power) are only conquered – presupposing the help
of divine grace – by a diametrically opposed attitude: a commitment to
the good of one's neighbour.” (n.
38)

So,
the surest and only way of advancing the cause of honest money is that
method which develops study and devotion. This is the method advocated
by the Pilgrims of St. Michael, with the “Michael” Journal. Come to
our meetings, order leaflets like this one to distribute around you,
solicit subscriptions to the “Michael” Journal!